2012 is clouded with risks. The negative impact of the Eurozone debt crisis is expected to be protracted and will continue to pose a threat to the global demand. This does not bode well for export-driven economes such as SIngapore. Indeed, the ex-biomedical industrial production has continued to falter against the external headwinds. And the fact that the biomedical segment is the only factor keeping overall industrial production afloat is not particularly comforting given the risk of a possible pullback in the pharmaceutical output in the coming 1-2 quarters.

The electronics industry has been bleeding since the start of the year. WHile the most recent October US SEMI book-to-bill has improved a tad and that the decline in global semiconductor sales has eased, it remains to be seen whether this marks the bottom of the current down-cycle.

Plainly, if we juxtapose the current electronics slump with a possible pullback in the pharmaceutical segment, a sharp drop in manufacturing growth in the next 1-2 quarters appears to be on the cards.
Moreover, Asia itself is also slowing. Overall growth in Asia next year will be slower, led by a soft landing in China. China's GDP growth is expected to moderate to 8.5% in 2012, from 9.0% this year.

These factos will continue to weigh down on the growth outlook of the Singapore economy although we do not expect a global recession. Such poor economic conditions will probably last for another 1-2 quarters before a more pronounced improvement in outlook can be expected in the second half of the year. The recovery in the US will likely gain momentum whereas a more solid resolution may be in sight in the Eurozone by then.

As such, we foresee a weak first half followed by a pick-up in the growth momentum in the second half of 2012. Overall, the econmy is expected to post a full year growth of 3.5% in 2012.